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#53 Reverse Mortgage Income to Reduce IRMAA


David Garrison
Home Equity Retirement Specialist
NMLS # 1595194
Serving the State of Indiana
p (317) 644-2595 c (765) 516-0130
e [email protected]

2169 East Rutland Lane, Martinsville, IN 46151
Corporate NMLS #1025894

After retiring from long professional careers, the two of you have been able to maintain a relatively high standard of living based on retirement income supplemented with earnings from employment data security consulting gigs. In fact, 2019 began a string of unusually high income years for you, and you have been able to add a very tidy sum to your jointly held investment accounts, along with updating the kitchen and baths in your home.

All good news, until a recent notice from the Social Security Administration informed you that, beginning in 2022, your monthly premiums for Medicare will be close to triple what you are now paying. Your tax advisor explained that the increase is related to IRMAA (Medicare Income-Related Monthly Adjustment Amount). This, you’ve now learned, is an amount you will pay in addition to your Part B and Part D (prescription coverage) Medicare premiums. Since you anticipate even greater earnings the last quarter of this year and even more next year due to the consulting opportunities arising from pandemic-related staffing issues, this annoying new insurance cost may increase even further, you fear. While your tax advisor had suggested contributing to SEP accounts in order to reduce your taxable income, you are reluctant to reduce your current lifestyle spending to any significant degree.

Tapping housing wealth in the form of a reverse mortgage might help solve some of the “too high an income” issues you describe. Tax-free, lump sum withdrawals from the reverse credit line can provide funding for significant charitable gifts in this and coming years, thus reducing taxable income. Those reverse mortgage withdrawals might also fund contributions to SEP retirement accounts (out of which withdrawals can be deferred until age 72). As your consulting income rise, these two tactics can nicely reduce Medicare premium “bracket creep”.